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The LFG Show
Arthur Souritzidis's Roadmap To Financial Stability In The Solar Industry 🔆
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🔆 *Why Are Solar Companies Crashing and Burning? 🌞*
Arthur Souritzidis, the dynamic CEO of Momentum Solar, reveals the shocking truth behind the industry's failures. Forget about rising interest rates—Arthur exposes how a dire shortage of working capital, worsened by third-party financial intermediaries halting advance payments, has pushed many companies to the brink. 💸📉
Tune in to hear Arthur's expert advice on navigating the choppy waters of solar component prices and customer pricing elasticity. Discover why meticulous financial management is more crucial than ever in today's volatile market. 📊💼
In this episode of **The LFG Show**, we reflect on the essence of learning and collaboration, and how our symbiotic relationship has driven significant growth in our ventures. 🌟 We share invaluable lessons learned from setting up a call center and the importance of surrounding ourselves with people who add meaningful value. Our deep connection with Arthur Souritzidis, a key figure in the solar industry, underscores the power of collaboration. 🤝💡
Don’t miss out on this rare and insightful interview!🌍✨
Special shoutout to our sponsor, Ringba, for making this episode possible! 📞💪
Timestamps:
0:00
Solar Industry Challenges and Solutions
Business Partners Reflect on Success
Solar Industry Challenges and Solutions
Speaker 1Guys, I have a very, very, very special guest, my man, Arthur Saracitas, CEO of Momentum Solar. Special guest for me because you're someone I probably haven't told you. I've looked up to you for a long time, man. A lot of our growth here at Solar Direct Markets is correlated to your growth. You know, you're one of our first big solar clients we had back in 2016. You guys grew. We grew with you, man, and I want to thank you for that and watching what you've gone through, Like you know, solar's been all over the place. They call this shit a solar coaster, right. So you know, talking to you, this is like guys, listen to what all these gyms is about to spit over here. So you're just on stage talking about why solar companies are going out of business, right? What's the main reason they're going out of business and what's going to stop this shit.
Speaker 2First of all, Dave, love you, bro, You've killed it. Love watching what you've done with this business. So the general misconception is that interest rates is why the industry has all this tumult. But the reality is that our industry has an absolute deficit of working capital. Three, four months ago, every single third party financial intermediary Goodleaf, Sanova, Sunrun, all the big guys took those payments and noticed the proceed. There were 30, 40, 50 percent. They brought them to zero. Companies can't survive under that weight. That's what they depended on to pay for their installations, pay for their materials, pay for their leads. And when that money dried up, you know you had to be a company that was profitable and well run to to kind of be able to prevail. So that's, that's the tough spot that the industry is right now in a nutshell.
Speaker 1Yeah, and the bottom line is that you guys are still around. Right, we had some clients back in December, january two clients doing $700 million a year in revenue. It's a big fucking number gone out of business.
Speaker 2So to put a finer point on what I was saying, that is the problem exactly. These companies, through these frothy periods of exuberance, were growing, growing, growing because financial partners they wanted to grow too. So they're giving you 30%, 40%, 50% up front, and as long as they were getting that money, sales was the easy part. So they kept growing, growing, growing and then when they said, oh, we don't understand our counterparty risk, we got to put the kibosh on the early payments on a project. That's when, all of a sudden, they had no money to fulfill their business and these companies essentially grew themselves out of business. That's the crux of it. Specifically, what happened was these companies had a lot of cancellations on their books. So it's not only that they didn't have money to front advanced payments to sales reps to pay for their materials, but at the same time, they were taking that money playing the float to manage their business, use that as working capital when so like.
Speaker 2Maybe you know if they. There was some of our vendors. We had 30 40 million dollars in the bet. What percentage? If you're a good company, maybe five million of that would be canceled projects. If you're a shitty, shitty company, it could be $30 million. That went to bad and there was actually a company, I don't know, like not the name job you could edit out whatever but you know Sunlight had a $30 to $40 million write-down that they took.
Speaker 2That's actually the specific moment when every financial provider out there went to zero money up front and that's when growth in the industry stopped on a dime. It wasn't the systematic increase of interest rates. Everybody correlates it to that and actually through this period a lot of companies are experiencing margin expansion because component prices are falling precipitously. We have material modules, as an example, down 50% year over year and then there's also some price elasticity within customers. So between being able to charge customers a little more, panel prices falling and prices year over year, there's, and then there's also some price elasticity within customers. So between being able to charge customers a little more, panel price is falling and price is otherwise falling, a lot of companies have a thicker margin than they had previously.
Speaker 1Yeah, guys, the panel was just amazing. That's one of the best panels I've seen like in years. What you guys are talking I'm talking about in years. What you guys are talking I'm talking about listen, people watch my show. I'm all rah, rah, sales, sales and we all, you guys I see now it's a moment. I saw you guys in 2016. It was all rah, rah, it was fun, right, but at the end of the day, you got to look at your fucking numbers. You got People don't understand that, they get nervous about it but looking at every single dollar, right, you have to have a return for every single dollar. Can you expand upon that?
Speaker 2Yes. So one of the questions that they asked on stage is what should we do? How do you and I mean the immediate answer is cut costs, make sure that your business is profitable, because there is not external capital in this type of market right now to grow your business. External capital in this type of market right now to grow your business, that money if you could take it on board is going to be so punitive in terms of the restrictive covenants it imposes on your business. You'll collapse under its weight or worse, it'll be. Well, nothing's worse than that, I suppose. But also it could be hugely dilutive, right? I mean, it's like if I was to raise money with our company. I'd like to believe that we have a good company and still our value, just because our value is determined on a multiple of earnings and those multiples that they're willing to pay on earnings, even if you have the same earnings, is up maybe a third of what they would pay just eight to 12 months ago. So the market's shut, it's closed. So we need health self-help provisions. And what self-help is that? Making money, having that money fuel your operations and your growth and development. And you can't do that without cutting costs and controlling costs.
Speaker 2You know the old, I guess, adage of a dollar saved is a dollar earned. Well, it's so true. Bring your break-even point of your business down. Look at your general administrative expenses, cut them. Your sales and marketing expenses.
Speaker 2Who's not productive? We don't have time to wait for people to support them and hopefully that they're going to produce in three, four months. What's a normal cycle in your business for somebody to be productive to bring you people to generate leads? You know, within 60 to 90 days, I would argue, if it's not happening inside of 30 days, you got to have signs Inside of 60 days, no longer For sure, if they're not paying themselves. You said it Every dollar that we contribute to payroll has to have a return affiliated with it. It's an imperative. This is for viability's sake. So if they're not doing it, we have to move on to the next people Foster growth train. Make sure you do all those things so everybody has the best chance.
Speaker 2But if they're not able to be a productive contributing member to your earnings, so you can reinvest those earnings into the modest growth of the business earnings. So you can reinvest those earnings into the growth modest growth in the business. We need to grow slower. This industry was growing at a 35% to 40% clip year over year. It's not time for that. We need to slow down, be viable, take advantage of the fact the companies that make it are going to be in this complete open playing field, with so much more TAM and white space for us to tackle new customers, new clients. There's a lot of consolidation going on right now. The companies that survive are going to take tremendous share in the future. We don't need the growth right now. We need to survive, get through it, try to make money along the way.
Speaker 1When you say consolidation, that's what I think is going on. I think that's a sign of maturing industry. When you got involved in the industry, you got right out of college. It was pro-custom, sold into momentum. You guys blew the fuck up like a rocket ship and now you're seeing the consolidation. But that's part of maturity and that's where the next cream rises to the top. You agree with that.
Speaker 2Absolutely. Right now it's more attrition actually than consolidation, but just because there's a lot of companies that, candidly, aren't great companies, some good companies that just didn't, it's very hard If you you have success, you find success in sales and you did 20 million dollars in a year and all of a sudden you did 20 million dollars in a month. Well, how do you have the controls and you've done that.
Speaker 2You've been there, yeah, sure, and and far beyond. You know, and I think that, um, you know, without the the records of people in place, it would be impossible, and I've also learned along the way, going through really positive and negative cycles. Don't wait to cut expenses. And you think that you're going to be cutting into bone. If you cut 20% of your staff, I'm telling you that's not the case, and a lot of times, the bottom 10%. You should almost be in a perpetual process of getting them out and working them out for their sake as well, so they could go find opportunities where they're going to be. Because so long we've got employees for three, four, five years in sales, just totally mediocre and marginal, and ultimately we're holding them up, taking up the prime of their lives where they could be investing in broadening their growth and development opportunities, but instead we're keeping them hostage to a mediocre thing, right? So it's like you have to.
Speaker 2You can't think of this in terms of an altruistic perspective. I don't think you have to be a strong leader that thinks about the balance of your employees, and we're in this business right now. If we have 2,000 employees and 500 have to go, that's for the remaining thousands of employees and for the ones that leave because they're going to go find better opportunities. We're not getting rid of our best and brightest and our producers. We're getting rid of people where this wasn't a great pragmatic fit. So we can't be afraid of that process. We can't think we're doing people a favor. We're hurting people. Let them go, cut the cord. Let them go and find where they're going to blossom and develop and be nurtured in those environments and let us focus on having a sustainable business for tomorrow.
Business Partners Reflect on Success
Speaker 1Got huge words of wisdom. Guys, listen to this. It's just amazing. I hope this is recorded. That panel, because you talked. You expounded upon a lot of this stuff. The one thing I'm going to say you know, success leads clues and imitation is the highest form of flattery. There's a term I use a lot. A lot of people on my show will hear me say it. My partner said it the other day. I learned that from you.
Speaker 2Appreciate it. Man. Listen, I learned how to put a call center together from you, so I guess actually you're going to have to edit that. Alex is going to be pissed at that.
Speaker 2Wait, Alex, they invented that oh, okay, okay, no, no, no. Listen. In the early days, putting together, we learned from each other. That's what's so beautiful about the business and that's for me, because this is what's important to me. This is what's important to you. I know you don't have three words to say when people aren't talking about business, so I know you appreciate that. Dude, this is our ecosystem, this is where we're comfortable, and to be able to do it and work and live and play with people that contribute to your business in meaningful ways. We've done probably hundreds of millions of dollars of revenue together.
Speaker 2That's amazing. Over the years right, and to be able to do that with people we love and respect, all the better.
Speaker 1So I really appreciate you, arthur. Man really appreciate being on the show. He doesn't do a lot of interviews, man, so this is like a blessing. We're representing Jersey over here, fucking love you, man this guy. Big shit. How can people find out more about you, man? What do you want them to find? The solarcom Watch, that fucking panel. I hope we can drop a link to it. That was amazing guys. Anyone in the business? This guy's got nothing but pure nuggets. Love him. Thanks again man, thanks for doing it.